What Is A Social Enterprise?

Social businesses and enterprises are on the rise. One of the benefits of the rising tide of capitalism is the realisation that the mechanisms of the free market can be a powerful means to catalyse change. Herald the entry of conscious capitalism, the idea that “business is inherently good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”

With ever more millennials striving for purpose alongside profit, it seems inevitable that eventually, all future businesses will be at the very least, expected to be responsible and transparent, and at the very most, charged with solving the world’s many intractable problems.

What it means to be a social business

I always get the question, “So…are you a social enterprise?” To which I usually reply, what does social enterprise mean to you? Most of the time, the reply is: “your business helps people”. In a way, this is not off the mark, but by virtue of providing employment and creating value (although that value may be debatable sometimes), all businesses in one way or another help people.

A more pointed definition is “a business that aims to solve a social problem or effect social change. By incorporating a social mission they give back to their community while earning profits, and in turn allow their customers to affect positive change through them.” The main point is that profit is a means, not a goal, and the higher purpose of existence for the entity is the solving of a social problem. Profit and purpose are not mutually exclusive, but purpose ranks first.

Profit and purpose are not mutually exclusive, but purpose ranks first.

Beyond this broad definition, there are multiple versions of how a social impact entity can be incorporated, for example, as a community owned cooperative or development trust. Here are the two broad ways in which we’ve seen social enterprises in the sustainable fashion space make their impact.


Option 1: Through allocation of profit or revenue

This is the most long standing classic model, which many companies employ. Basically, a committed portion of profit or revenue is put aside for charitable or social works, and as the business grows, as long as the amount put aside is a percentage of revenue, the impact will grow as well. This model is common in many businesses which are inspired by impact in areas that their operating decisions do not touch, for example United By Blue: for every product sold, this brand removes one pound of trash from our world’s oceans and waterways.

Another recently popular model is the Buy One Give One (BOGO) model, championed by companies like TOMS and Warby Parker. This is kind of an in between between Option 1 and 2, where the impact is related to business growth, but only in terms of final product. Impact considerations may not make its way into operations of the primary product. This means, for example, that TOMS could be making its shoes paying under minimum wage in terrible conditions in China, while giving away free shoes to poor children in Argentina (to simplify things). This article from NY Times provides a comprehensive view on the TOMS controversy.


Option 2: Through operating decisions and supply chain

This model holds the view that “every decision that goes into manufacturing a product — the materials, the factory, the packaging, the method of distribution — can produce social empowerment”. Its a systemic approach that takes into account all factors of a business. The star example in our view is Reformation. With every piece made from textile waste and sustainable fabrics, the brand’s tagline ‘killer clothes that don’t kill the environment’ is a clarion call to all those who love edgy yet classic cuts, but want them out of an eco-ethical factory (think wind power, LED lighting, zero waste, female employment, above benchmark wage, the works…)


Our value chain for change

When we first started, a key consideration for how we would achieve impact is that positive change would happen naturally through our day to day business processes, and not just as a byproduct like through donations or charity. It’s just one of our beliefs that as the business grows, our impact should naturally grow with it and be integral to its core operations.

With this in mind, our theory of change revolves around several metrics, the key ones being the number of designer-artisan collaborations fostered, traditional techniques worked with, artisan partnerships developed and number of artisan days of employment. In terms of collaborations, we’ve worked with over 15; in terms of artisan partnerships, we have over 7, and in terms of techniques, we work with 6 or so and developing 3 more.

We are currently in the process of zeroing in on the number of artisan days of employment created through each product we make. Besides that, we’ve also started making a commitment to guidelines that a certain percentage of the cost of each product (calculated in terms of door to door costs) should go directly to artisan processes. At the moment, the range is from 20-45%. We think 40% should be our benchmark.

Here’s an infographic on what the current breakdown looks like:

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Calling ourselves a socially motivated brand is an intentional choice. Why? Because we are motivated beyond profit, the traditional single unit of measure of a business’ success. We are driven by purpose, and provenance. Because business is only a vehicle for us to achieve our mission, which is to be the foremost artisan-based brand pioneering industry change and sustainability for rural craft livelihoods in Asia.

Read more on our journey of starting a values based businesschoosing an ethical production partner, and what slow living means to us.

Have a favourite social enterprise or business you think we should know about? Any suggestions on how we can make better impact?

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